This dissertation presents a theory of world and regional growth based on the demand for technological product innovation. A Neo-Schumpeterian view for technological innovation is used in developing a general equilibrium model of Product Technology. Here firms behave as monopolistic competitors and, motivated by the incentive to gain market share, allocate labor to increase the technology level embodied in their product lines with the increasing quality or technology level generating balanced endogenous income and production growth. In the model products at different technology levels compete simultaneously, and when the model is extended to include regional trade it is shown that, depending on the labor supply characteristics and the ability to innovate, a region may produce products that are technologically inferior relative to other regions. It is also shown that both a large global economy and a small region will experience growth convergence. However, depending on the optimal relative product technology level, a region may or may not experience long term income convergence. Thus, different from the traditional perspective, even if firms in two regions have identical production functions the region that produces the product with the lower relative technology level will have a lower relative income level. This implication results from explicitly considering the demand for product technology. To assess the empirical relevance of this theoretic model a second model based solely on Process Innovation (firms are motivated to reduce production costs) is developed. It is shown that when used to analyze a large economy both models have nearly identical properties. However, when the models are extended to a global economy with regional trade, differences in firm behavior and the technology price relationship imply different qualitative relations for growth at the regional level. Regressions using aggregate data for 36 countries from 1960-1985 provides qualitative support for the Product Technology model. A full cross-country data analysis of the data set used is also provided. The change in capital, labor, and terms-of-trade over 5 year periods are positive, significant, and robust explanatory factors of growth.
|School:||New York University|
|School Location:||United States -- New York|
|Source:||DAI-A 56/05, Dissertation Abstracts International|
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